Buying a home is very exciting. However, nothing can be a bigger disappointment than finding out that your loan is denied before you are about to close your transaction!
You’re a week away from having the keys to your new home and your loan officer calls to let you know that your loan was denied due to a change in your profile. This can and does happen often. But there are a few things that you can do to make sure that this won’t happen to you.
Keep the following points in mind while you are in the process of buying your home:
Don’t Apply for New Credit of Any Kind. Don’t respond to any invitations to apply for new lines of credit and don’t establish new lines of credits for furniture, appliances, computers, department stores etc. Even if there are no payments for 12 months, we will need to count this debt against you. This will also have an adverse effect on your credit score. Wait until your loan closes to purchase items for yourself and new home.
Don’t Max Out or Over Charge on Existing Credit Cards. Running up your credit cards is the fastest way to bring your score down. Once you have engaged in the loan process, try to keep your credit card balances to below 30% of the available limit.
Don’t Close Credit Card Accounts. If you close a credit card account, it can negatively affect your ratio of debt to available credit. If you really want to close an account, wait until after you close the loan.
Don’t Raise Red Flags to the Underwriter. Don’t change your name and address and don’t co-sign on another person’s loan. The less activity that occurs while your loan is in process; the better it is for you.
Don’t Make Large Unexplainable Deposits Into Bank Accounts. Deposit amounts into your bank accounts that do not match your past history will be questioned by an underwriter unless the deposit is documented as a gift or can be explained. This includes cash deposits and moving funds from one account to another.
Don’t Make Changes to Your Employment/Income. Employment stability is a huge factor in the underwriting loan process. Quitting or changing jobs or even moving positions within the same company can greatly endanger your loan approval. Inform your loan officer immediately of any changes to your job, position or income.
Your Down Payment: Do you have your down payment all set? Is it in one account? Have this prepared before you purchase your home. Whether it is gift funds, liquidation of your retirement or moving funds from one account to another. By having these funds all in one account, it will simplify the process. If you receive a Gift, let’s say for $1,000 from family, Don’t deposit $900 or $1100, as this will be hard to explain why the amount is different from the Gift amount.
Bottom Line: Don’t Make Any Adjustments/Transfers in Your Asset Picture. Talk to your Loan Officer first. Don’t make any changes in investments, move positions, close accounts, open new accounts, or substantially alter your asset picture.
Send me an email or call with any questions you may you have. Cell phone is 978-273-3227 and email me at email@example.com.